On behalf of the petitioner-appellant, the cause was
submitted on the briefs of James A. Walrath of Zetley Law Offices, S.C., Milwaukee.

Respondent

ATTORNEYS:

On behalf of the respondent-respondent, the cause was
submitted on the brief of F. Thomas Creeron III, assistant attorney general, and J.B. Van Hollen,
attorney general.

2014 WI App 7

COURT OF APPEALS

DECISION

DATED AND FILED

December 27, 2013

Diane M. Fremgen

Clerk of Court of Appeals

NOTICE

This opinion is subject to
further editing.If published, the
official version will appear in the bound volume of the Official
Reports.

A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals.SeeWis. Stat. § 808.10 and Rule 809.62.

Appeal No.

2013AP366

Cir. Ct. No.2011CV5206

STATE OF WISCONSIN

IN COURT OF
APPEALS

Elijah M. Rashaed,

Petitioner-Appellant,

v.

Wisconsin Department of Revenue,

Respondent-Respondent.

APPEAL
from an order of the circuit court for Dane County:c. william
foust, Judge.Affirmed.

Before Blanchard, P.J., Lundsten and Kloppenburg, JJ.

¶1LUNDSTEN, J. Elijah Rashaed appeals the
circuit court’s order affirming a Tax Appeals Commission decision.The commission upheld the Department of
Revenue’s determination that Rashaed is personally liable for sales taxes from
the years 1998-2000 owed by one or more businesses Rashaed operated.The parties agree that there is generally a
four-year statute of limitations for imposing liability for a sales tax
deficiency, regardless of willfulness.SeeWis.
Stat. § 77.59(3) (2011-12).[1]However, under Wis. Stat. § 77.60(9), the provision at issue in this
case, there is no limitations period when the Department seeks to impose
personal liability on persons who willfully fail to pay, account for, or
collect a tax they were required to pay, account for, or collect.Rashaed challenges § 77.60(9) on equal
protection grounds, arguing that the absence of a limitations period, when
compared with the general four-year limitations period applicable to liability
under § 77.59(3), lacks a rational basis.We agree with the circuit court that Rashaed has not identified an equal
protection problem, and affirm.

Background

¶2The underlying sales taxes at issue total approximately
$191,000.The taxes were owed by one or
more business entities associated with a clothing store that Rashaed operated.Although the taxes were for periods ending in
1998, 1999, and 2000, the Department did not seek to hold Rashaed personally
liable for the taxes until some time in 2009.[2]

¶3Rashaed petitioned the Department for redetermination of his
liability for the taxes, and the Department denied his petition.His efforts to have his tax liability
overturned by the commission and the circuit court were also unsuccessful.

Discussion

¶4The only issue on appeal is Rashaed’s equal protection
challenge to Wis. Stat. § 77.60(9).The constitutionality of a statute is a
question of law that we review de novo.Nankin
v. Village of Shorewood, 2001 WI 92, ¶10, 245 Wis. 2d 86, 630 N.W.2d
141.“The burden is on the party
challenging [a] statute to prove that the statute is unconstitutional beyond a
reasonable doubt.”Id.The courts “indulge ‘every presumption to sustain
the law if at all possible.’”Id.
(quoted source omitted).We conclude,
for the reasons explained below, that Rashaed fails to meet his burden.

¶5Rashaed does not argue that this case involves a suspect
class or a fundamental right or interest.Accordingly, the only question is whether there is a rational basis for
the statutory classification that the legislature has created.Seeid.,
¶11 (“[W]here the statutory classification does not involve a suspect class or
a fundamental interest, we will sustain the classification if there exists any
rational basis to support it.”).

¶6“Whether a legislative distinction between otherwise
similarly situated persons violates equal protection depends upon whether there
is a reasonable basis to support it.” State
v. Dennis H., 2002 WI 104, ¶31, 255 Wis. 2d 359, 647 N.W.2d 851. We will uphold the legislature’s
classification as having a rational basis unless

“the legislature has made an irrational or arbitrary
classification … that has no reasonable purpose or relationship to the facts or
a proper state policy.”Any doubts must
be resolved in favor of the reasonableness of the classification.

“‘The fact [that] a statutory
classification results in some inequity ... does not provide sufficient grounds
for invalidating a legislative enactment.’”…“[t]he basic test is not
whether some inequality results from the classification but whether there
exists a rational basis to justify the inequality of the classification.”

Metropolitan Assocs. v. City of
Milwaukee, 2011 WI 20, ¶¶61-62, 332 Wis. 2d 85, 796 N.W.2d 717 (quoted
sources and citation omitted).If the
legislature has not expressly articulated the basis for its classification, the
court is “obligated to construct a rationale if at all possible.”Id., ¶63.

¶7The parties agree on the pertinent statutory framework that
creates the categories that are treated differently in terms of statutory time
limits on liability.As indicated above,
there is a general four-year statute of limitations for determinations of sales
tax deficiencies.SeeWis. Stat. § 77.59(3).However, under Wis. Stat. § 77.60(9), there is no statute of
limitations when the Department seeks to impose personal liability on a person
who does not himself or herself owe taxes, but who is obligated to ensure
payment of taxes owed by a taxpaying entity.More specifically, no statute of limitations applies when:

·The person is “required to collect, account for
or pay the amount of tax imposed”;

·The person “willfully” fails to collect, account
for, or pay the tax; and

·The person’s “principal is unable to pay such
amounts.”

Wis.
Stat. § 77.60(9).

¶8As a threshold matter, we note that we treat Rashaed’s equal
protection challenge as a facial challenge, and not as an “as applied”
challenge.As the Department points out,
the supreme court has explained the distinction this way:

“If a court holds a statute unconstitutional on its
face, the state may not enforce it under any circumstances, unless an
appropriate court narrows its application; in contrast, when a court holds a
statute unconstitutional as applied to particular facts, the state may enforce
the statute in different circumstances.”

State v. Konrath, 218
Wis. 2d 290, 304 n.13, 577 N.W.2d 601 (1998) (quoted source omitted).Rashaed’s brief-in-chief does not address
this distinction or how it might affect our analysis.The Department argues in its responsive brief
that Wis. Stat. § 77.60(9) is
constitutional both on its face and as applied to Rashaed.In his reply brief, Rashaed asserts that he
is making both types of challenges, but we can discern no developed as-applied
argument.Accordingly, we address Rashaed’s
facial unconstitutionality arguments and ignore his assertion that he makes an
“as applied” challenge.

¶9Rashaed states that this case presents the question whether
there is a rational basis to treat “taxpaying businesses” differently from
“their officers” who are responsible for actually paying the businesses’
taxes.Thus, Rashaed appears to assert
that the legislature has created, and improperly treated differently, the
following two categories:

(1)Sales taxpayers
that are generally businesses and that are deficient in their payment of sales
taxes, but not willfully so.

(2)Business officers
and other natural persons, such as Rashaed, who are responsible for paying
taxes owed by businesses and who willfully fail to fulfill that
responsibility.

At the same time, Rashaed
points out that his first category, “businesses,” includes not only business
entities but also “natural persons.”[3]To the extent that Rashaed is saying that the
key distinction between the two categories is that, in general, the first
category is primarily comprised of
business entities while the second category is comprised of natural persons, he
misses the mark.The most important
distinction between the two categories is willfulness in non-payment of
taxes.

¶10Rashaed never comes to grips with the proposition that different
treatment may be rationally based on a difference in culpability.Persons who merely fail to pay taxes are not
as culpable as persons who willfully fail to pay. Rashaed does not demonstrate that this
justification for the difference in treatment is irrational.

¶11As the circuit court reasoned, the legislature could have
rationally concluded that it may take longer to identify, locate, and collect against
natural persons who willfully fail to meet their obligations as specified in Wis. Stat. § 77.60(9).Indeed, the commission’s decision contains
detailed factual findings supporting a conclusion that Rashaed evaded payment
of business tax liabilities for several years by, among other things,
repeatedly changing his name.While we
need not rely on the commission’s findings to conclude that the classification
has a rational basis, those findings illustrate the type of situation that the
legislature could have contemplated.

¶12Rashaed’s primary equal protection argument appears to be that
the different statute-of-limitations treatment of the two categories is
irrational because, as to the second category (the one including Rashaed),
having an “unlimited” statute of limitations on personal liability is inherently
irrational.[4]We are not persuaded.

¶13Rashaed supports this argument with case law stating that
unlimited statutes of limitations are “repugnant to the genius of our
laws.”See Adams v. Woods, 6
U.S. (2 Cranch) 336, 342 (1805); United States v. Mayo, 26 F. Cas.
1230, 1231 (C.C.D. Mass. 1813).In Adams,
the Supreme Court further stated that “it could scarcely be supposed that an
individual would remain forever liable to a pecuniary forfeiture.”Adams, 6 U.S. (2 Cranch) at
342.

¶14While these cases might at first seem to support Rashaed, they
do not involve constitutional questions, and Rashaed does not address contrary
case law that seems to more plainly address the topic.For example, inLucia v. United States,
474 F.2d 565 (5th Cir. 1973), the court explained that “there is no substantive
or fundamental right to the shelter of a period of limitations….[T]he extent to which a tax assessment is
barred by time is within exclusive Congressional control, unlimited by the
Constitution.”Id. at 569-70; see alsoE.I. Dupont De Nemours & Co.
v. Davis, 264 U.S. 456, 462 (1924) (reasoning that “an action on behalf
of the United States in its governmental capacity … is subject to no time
limitation, in the absence of congressional enactment clearly imposing it”); Mullikin
v. United States, 952 F.2d 920, 927-29 (6th Cir. 1991) (referencing
several “unlimited” statutes of limitations in the federal tax code and
explaining that “the government is not subject to a statute of limitations on a
cause of action in its favor unless the government expressly so provides”).[5]

¶16As the Department points out, the pertinent issue in Chrysler
Outboard was whether the court—not the legislature—should apply the
so-called “discovery rule” to a certain class of pollution claims, thus
creating an “open-ended” statute of limitations for those claims.See id. at 156-58.The court declined to apply the discovery
rule, concluding that application of the rule in that context was a policy
choice for the legislature.Id.The court reasoned that “‘Wisconsin courts have traditionally held that
statutes of limitation are policy considerations within the province of the
legislature,’” and that “the decision to adopt an open-ended discovery rule of
this sort is a course of action that should be undertaken only after
substantial review by the legislature.”Id.
at 156 (quoted source omitted).Here,
the legislature did make the policy choice.

¶17Based on this case law and on the nature of an equal protection
challenge, we think it clear that the real question here is not whether an
unlimited statute of limitations is inherently irrational, but rather whether
there is a rational basis for the legislature to apply a statute of limitations
to one class but not the other.We agree
with the circuit court and the Department that Rashaed’s remaining arguments on
this topic fall short.We identify and
reject each below.[6]

¶18Rashaed argues that the legislature failed to “voice its
reasoning” for the classification and that the reasons we rely on are mere
“conjecture” or “speculation” as to the legislature’s motives.This argument fails because courts are
obligated to look for supportive rationales when the legislature does not
expressly provide one.SeeMetropolitan Assocs., 332 Wis. 2d
85, ¶63.

¶19Rashaed argues that the circuit court failed to consider the
purposes behind statutes of limitations, including promoting diligence,
preventing loss of evidence, screening out meritless claims, and allowing the
psychological comfort of repose.As we
understand it, Rashaed is arguing that the circuit court, and now this court,
must consider these policy considerations because a classification must be
“germane to the purpose of the law.”SeeNankin, 245 Wis. 2d 86, ¶39.Assuming for argument sake that these
considerations favor uniform treatment of the two categories, it remains true
that the legislature could have rationally concluded that other objectives,
including objectives related to the purposes of the sales tax liability
statutes, outweigh them.

¶20Rashaed’s next argument relates to the requirement that a
classification must be based upon “substantial distinctions” which make one
class “really different” from another.See id.Rashaed argues that the classification here
runs afoul of this requirement because a person’s tax liability under Wis. Stat. § 77.60(9) is
“derivative” of the business’s tax liability.Rashaed points to a 1996 commission decision that states:

Under the provisions of sec. 77.60(9), Wis. Stats., the
liability is derivative.An
assessment made pursuant to said section is not in the form of a personally
assessed penalty, but is a transfer of the corporation’s actual liability,
including interest and penalties thereon.

Drilias v. DOR, TAC
Docket Nos. 90-S-466 & 90-W-467, 1996 WL 288062, at *4 (Wis. Tax App.
Comm’n May 31, 1996).We reject
Rashaed’s argument based on Drilias because the commission’s
decision in that case does not involve an equal protection analysis (or any
other constitutional issue), and Rashaed does not explain why the derivative or
transferred nature of the liability might matter for purposes of equal
protection.The legislature created a
substantial and real distinction between a class of taxpayers that are merely
deficient in paying their taxes and a class of persons who willfully breach
their tax-related obligations.The fact
that the underlying liability may be “derivative,” “transfer[red],” or even the
same is, so far as we can tell, beside the point.It is the two classes that must be “really different.” See Nankin, 245 Wis. 2d 86, ¶39.

¶21Finally, Rashaed argues that the classification at issue is not
rational because the legislature provided a six-year statute of limitations for
felony sales tax violations.Rashaed
appears to argue that this undermines any conclusion that culpability could
provide a rational basis for the unlimited statute of limitations for civil
liability under Wis. Stat. § 77.60(9).We disagree.The legislature could have rationally concluded that civil liability (or
the threat of it) for an unlimited period is a less severe consequence than
felony criminal liability (or the threat of it) for a six-year period.

Conclusion

¶22In sum, for the reasons stated, we reject Rashaed’s equal
protection challenge to Wis. Stat. § 77.60(9).We affirm the circuit court’s order upholding
the commission’s decision that Rashaed is personally liable under
§ 77.60(9) for the taxes at issue.

By the Court.—Order
affirmed.

[1] All
references to the Wisconsin Statutes are to the 2011-12 version unless
otherwise noted.

[2] In
this opinion, we refer only to “sales” taxes for ease of discussion, even though
we are uncertain whether the tax amounts at issue here include only sales taxes
or both sales and use taxes.The parties
do not suggest that it matters whether just one or both taxes are involved, and
it appears that both taxes are treated the same under the pertinent statutes.

[3] The
category of taxpayers subject to the four-year statute of limitations includes
any “person” as broadly defined in Wis.
Stat. § 77.51(10), which includes natural persons.Section 77.51(10) provides:

“Person” includes any natural person, firm, partnership,
limited liability company, joint venture, joint stock company, association,
public or private corporation, the United States, the state, including any unit
or division of the state, any county, city, village, town, municipal utility, municipal
power district or other governmental unit, cooperative, unincorporated
cooperative association, estate, trust, receiver, personal representative, any
other fiduciary, any other legal entity, and any representative appointed by
order of any court or otherwise acting on behalf of others.

The personal
liability of such person as provided in this subsection shall survive the
dissolution of the corporation or other form of business association....“Person”, in this subsection, includes an
officer, employee or other responsible person of a corporation or other form of
business association or a member, employee or other responsible person of a
partnership, limited liability company or sole proprietorship who, as such
officer, employee, member or other responsible person, is under a duty to
perform the act in respect to which the violation occurs.

Wis. Stat. § 77.60(9).

[4] We
follow Rashaed’s lead in referring to the absence of a limitations period as an
“unlimited” statute of limitations.

[5] That
is not to say that delays in pursuing tax liabilities in particular cases might
not implicate due process concerns, such as when a long delay impedes a taxpayer’s
ability to present a defense.But
Rashaed makes no such due process argument.

[6] Rashaed
loosely ties some of his arguments to the five-part test that courts sometimes
use to analyze equal protection challenges.That five-part test is:(1) the
classification must be based upon “substantial distinctions” which make one
class “really different” from another; (2) the classification must be
“germane to the purpose of the law”; (3) the classification must “not be based
upon existing circumstances only,” meaning that the classification “must not be
so constituted as to preclude addition to the numbers included within the
class”; (4) “[t]o whatever class a law may apply, it must apply equally to each
member thereof”; and (5) the characteristics of each class should be “so far
different from those of other classes as to reasonably suggest at least the
propriety, having regard to the public good, of substantially different
legislation.”See, e.g.,Nankin v. Village of Shorewood,
2001 WI 92, ¶39, 245 Wis. 2d 86, 630 N.W.2d 141.We reference parts of the test when
pertinent.